PPL proposes phase-in for hike

Sam KennedyOf The Morning Call

PPL Electric Utilities wants to offer its customers the opportunity to start paying more for electricity next year, rather than waiting until 2010.That's when a cap on what PPL can charge for electricity generation is due to expire and rates are expected to surge 35 percent for residents and up to 42 percent for some businesses.

But on Monday, PPL announced it will ask state regulators for permission to implement a five-year phase-in plan, starting next year. The idea is to reduce rate shock by giving people extra time to get used to paying bigger bills and making do with less discretionary money.

"We believe it is helpful to put in place an option for customers to spread out the impact," said David DeCampli, president of PPL Electric Utilities, a subsidiary of PPL Corp. of Allentown. "This phase-in plan underscores our efforts to continue to provide options for customers well ahead of the rate cap expiration."

Under the plan, residents and some businesses would start making additional payments on their electric bills beginning in mid-2008, continuing through the end of 2009. Money from those payments, plus interest, would be applied to bills in 2010, 2011 and 2012.

As a result, rates for the average residential customer would go up about 7 percent in both 2008 and in 2009, and about 6 percent annually from 2010 through 2012.

Customers who would rather take their rate hike all at once -- on Jan. 1, 2010 -- could opt out of the phase-in plan, PPL said.

Although PPL cast its plan as beneficial to its customers, not everyone was favorably impressed.

"This does not save customers one penny," said Bernard Kieklak, spokesman for Sen. Lisa Boscola, D-Northampton. Boscola is working on legislation that could extend rate caps beyond 2010.

"Simply put, this is all an accounting scheme," Kieklak said. "Customers will still be paying whatever the market will bear, and PPL will be making whatever the market allows it to extract from ratepayers."

At 35 percent, the 2010 hike would translate into an extra annual expense of roughly $420 for the typical residential customer of PPL Electric Utilities, who now pays about $1,200 a year for electricity.

That would make it the biggest hike in PPL history, and it suggests what is in store for Metropolitan Edison Co. of Reading and most other major Pennsylvania electric utilities the following year, when they, too, enter into the final stage of electricity deregulation.

PPL disclosed its latest rate hike estimates earlier this month after state regulators certified the second of six auctions through which PPL Electric Utilities is buying power for 2010.

The actual size of the hike, however, won't be finalized for two more years, after PPL Electric Utilities has bought all the power it needs for its 1.4 million Pennsylvania customers.

PPL Electric Utilities has also asked to implement a separate 5 percent residential rate hike on Jan. 1, 2008, to cover electricity transmission and distribution. (Unlike the price of electricity generation, what PPL can charge for transmission and distribution is not capped.)

So, if the state Public Utility Commission approves both the phase-in plan and the transmission and distribution rate hike, PPL residential customers could see their electricity bills rise by 12 percent next year.